Selling, general and administrative costs are part of manufacturing overhead.

True

Wrong.

SG&A costs and interest expense are reported as expenses on the income statement in the accounting period in which they are incurred. They could be viewed as administrative overhead, but not manufacturing overhead.

False

Right!

These expenses are nonmanufacturing expenses.

2.
Factory overhead and burden are terms used as alternatives for the term

__________

manufacturing

overhead.

3.

Which of the following are part of manufacturing overhead?

Direct Labor

Wrong.

Direct labor is a specific, separate component of the manufacturing cost of a product.

Indirect Labor

Right!

Indirect manufacturing labor is part of manufacturing overhead. Other examples of manufacturing overhead include equipment maintenance, factory supplies, and depreciation on the factory building.

Office Depreciation

Wrong.

Office depreciation is part of SG&A expenses and is not included in the manufacturing overhead. Office depreciation could be viewed as an administrative overhead.

4.
The factory maintenance department and the factory administration department are examples of

__________

service or support

departments.

5.

To be in compliance with generally accepted accounting principles, selling and administrative expenses and interest expense should be allocated to the cost of products manufactured in order to properly value inventories on a manufacturer's balance sheet.

True

Wrong.

SG&A and interest expenses are not allocated to inventories for financial reporting under generally accepted accounting principles. (Management might allocate these expenses internally to assist in pricing and other marketing decisions. However, they are not allocated for inventory valuation purposes.)

False

Right!

SG&A and interest expenses are not allocated to inventories for financial reporting under generally accepted accounting principles. (Management might allocate these expenses internally to assist in pricing and other marketing decisions. However, they are not allocated for inventory valuation purposes.)

6.

Manufacturing overhead must be assigned to both work-in-process inventory and finished goods inventory for external financial reporting purposes.

True

Right!

False

Wrong.

7.

Only direct manufacturing costs are assigned to inventories and cost of goods sold.

True

Wrong.

False

Right!

8.

Commissions paid to sell products are reported as part of the cost of goods sold.

True

Wrong.

False

Right!

9.

Traditional costing is more likely to be associated with allocating manufacturing overhead on the basis of

Activities

Wrong.

Machine Hours

Right!

10.

The depreciation on the machines used on the manufacturing line is considered to be __ _______________ manufacturing cost.

A Direct

Wrong.

An Indirect

Right!

11.

In general, manufacturing overhead has increased as a percentage of product costs during the past 80 years.

True

Right!

False

Wrong.

12.

The use of a plant-wide rate will be more equitable than the use of departmental rates for allocating manufacturing overhead.

True

Wrong.

False

Right!

13.

Manufacturing overhead costs are also known as indirect manufacturing costs.

True

Right!

False

Wrong.

14.

Using only machine hours for assigning manufacturing overhead will likely result in too ___________ costs for low volume products.

Little

Right!

Much

Wrong.

15.

The salary of the president of a manufacturer is part of the manufacturing overhead costs.

True

Wrong.

False

Right!

The salary of the president is part of selling, general and administrative expenses.